Gujarat High Court held that as per CBIC circular dated 23.02.2021 provisionally attached movable property (including bank account) should be released when the taxable person offers any immovable property in lieu of the same.
Facts- Petitioner is a Limited Liability Partnership (LLP) and is engaged in the business of manufacture and supply of goods like M.S. Billets (i.e. Mild Steel Billets). Petitioner No.2 is one of the partner of the petitioner.
Aggrieved by the communication dated 16.07.2022 received from the 3rd respondent, whereby proposal of the petitioner to replace provisionally attached movable property in the form of Fixed Deposits and Current Bank Accounts is rejected on 16.07.2022. Hence, this petition has been preferred.
Conclusion- The CBIC issued the circular dated 23.02.2021 laying down the guidelines for provisional attachment of the property under Section 83 of the CGST Act. Guidelines No.3.4.6 provides that any movable property including bank account belonging to the taxable person when has been attached, the same can be released when the taxable person offers in lieu of it any other immovable property, if the same is sufficient to protect the interest of the revenue and such immovable property should be of the value not less than the tax amount in dispute. The same should be free from any charges, liens, mortgaged or encumbrance, the property’s tax also needs to be fully paid up and the same is not to be involved in any legal dispute. The original title deeds and other necessary information relating to the properties for the satisfaction of the concerned officer shall be produced before it by the taxable person.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Petitioner is a Limited Liability Partnership (LLP) and is engaged in the business of manufacture and supply of goods like M.S. Billets (i.e. Mild Steel Billets). Petitioner No.2 is one of the partner of the petitioner.
2. Aggrieved by the communication dated 16.07.2022 received from the 3rd respondent, whereby proposal of the petitioner to replace provisionally attached movable property in the form of Fixed Deposits and Current Bank Accounts is rejected on 16.07.2022. Hence, this petition has been preferred.
3. The petitioner as a registered person is liable to pay GST on his taxable supplies by paying the tax in cash, or by utilizing Input Tax Credit (ITC). The tax paid on the input transactions is allowed as ITC under Section 16 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”) and ITC so allowed on Input transactions can be utilized for discharging the GST liability on the transaction of the outward supplies.
3.1 It is the say of the petitioner that since the inputs in the raw-materials like M.S. scraps utilized by the petitioner are tax paid is been availing the ITC benefits of the taxes paid on the input/materials like M.S. scraps supplied to it by the registered persons under their tax invoices. The GST officers investigated in respect of certain suppliers of materials like M.S. scrap. The inputs that those persons were involved in passing on ITC on tax invoices issued by them without actually supplying tax paid materials under such invoices. It is averred that some of such suppliers who has sold and supplied to the petitioners during the period from May, 2019, the business premises of the petitioner had been searched along with the residences of one of the partners on 19.11.2021.
3.2 On 25.11.2021, the 3rd respondent had provisionally attached various movable and immovable properties of the petitioner as well as his partners by issuing various Forms DRC-22 on the self same date on 25.11.2021.
3.3 Order of provisional attachment was passed. On 27.11.2022, by the respondent No.3 on certain movable properties of the petitioner’s partner for which the Form DRC DRC-22 had been issued.
3.4 The 2nd petitioner was arrested on 30.11.2021, and thereafter, he has been released on bail by an order of the Court on 16.03.2022.
3.5 The petitioner filed objections before the respondent authorities under Rule 159(5) of the Central Goods and Services Tax (CGST) Rules, 2017 (hereinafter referred to as “the CGST Rules”) and made a request in writing to lift the provisional attachment of the properties. Respondent, since did not pay any heed to the same, aggrieved petitioner had preferred the Writ Petition being Special CA No.19216 of 2021, which was disposed of by this Court on 17.12.2021 directing the 3rd respondent to pass the order within 3 days as regards the petitioner’s objections filed under Rule 159(5) of the CGST Rules.
3.6 Pursuant to the said directions, the 3rd respondent passed the order dated 20.12.2021 and rejected the objections.
3.7 The petitioner preferred Special CA No.188 of 2022 before this Court seeking to quash the six provisional attachment orders in Form GST-DRC-22 and also prayed for the directions to bank to allow to use of banking facilities.
3.8 The said petition might be decided by this Court on 27.01.2022 and attachment of stock lying in the factory premises and attachment of the sundry debtors as also the attachment of the immovable properties of the second petition have been quashed and set aside. For other properties, which were attached, the Court declined to interfere while rendering the judgment.
3.9 The petitioner requested the 3rd respondent by a communication dated 28.03.2022 for lifting the provisional attachment of the properties, with an emphasis to allow the use of the FDs and the bank accounts with the Banks. It also referred to the guidelines issued by the Central Board of Indirect Taxes and Customs (CBIC) vide circular dated 23.02.2021 in support of the request for lifting the attachment of the properties since that hampered the normal business activities of the petitioner. No reply was given by the respondent authorities although the petitioner’s representatives that consistently pursued the matter. Petitioner’s financial conditions is going from bad to worse; once again requested the 3rd respondent in writing vide application dated 21.04.2022 and requested the authority concerned to lift the provisional attachment of the FDs and the current accounts of the bank. The said been also forwarded to the Chief Commissioner of State GST at Ahmedabad, the Special Commissioner of State GST at Ahmedabad and also to the Additional Commissioner of State GST (Enforcement) at Ahmedabad. No reply was given by any of these authorities, and therefore, he approached this Court by preferring Special CA No.10659 of 2022 (Hon’ble Mr. Justice A.J.Desai and Hon’ble Mr. Justice Bhargav D. Karia). The Court disposed of the petition by a following directions:
“Having heard learned advocate Mr. Paresh Dave with learned advocate Mr. Pankaj D. Rachchh for the petitioners as well as having considered the prayers made in the petition and the judgement delivered by Co-ordinate Bench of this Court dated 27.01.2022 in Special Civil Application No. 188 of 2022, the Joint Commissioner of State Tax, Rajkot-respondent No.2 and/or the Assistant Commissioner of State Tax, Rajkot-respondent No.3 are directed to decide the applications submitted by the petitioner vide communications dated 28.03.2022 as well as 21.04.2022 as early as possible preferably within a period of four weeks from the date of receipt of this order in accordance with law. With the above direction the present petition stands disposed of. Direct service for respondent Nos. 2 and 3 is permitted.”
3.10 The petitioner had communicated the said order on 24.06.2022 by a communication and referring to the representations made on 28.03.2022, 21.04.2022 and CBIC Circular dated 23.02.2021 and urged for the release of Fixed Deposits in the form of the FDs.
3.11 The petitioner had also addressed another letter to respondent No.3 is to allow to convert the amount of Rs.4.11 Crores into Fixed Deposits. The amount of FDs credited automatically in the Current Account of Kalupur Commercial Cooperative Bank out of provisionally attached FDs and also withdrawal of the amount of Rs.13,00,000/- which was wrongly credited in Axis Bank Account. The respondent No.3 communicated on 19.07.2022, according to the petitioner, it completely ignored the fact that the part of offered GIDC land is mortgaged only on paper and free hold residential plot owned by petitioner No.2 was also offered in the communication dated 24.06.2022. He denied to accept the factory land in lieu of the Bank Account and Fixed Deposits. According to the respondent, the immovable property offered in lieu of movable property is owned by GIDC and is given on the lease to the petitioner. Again, it is mortgaged to the Kalupur Commercial Cooperative Bank, hence, it is not on the line of the guidelines issued by the CBIC and the Government of Gujarat.
3.12 The respondent’s attention was drawn to the content of the letter dated 24.06.2022 especially that certain plots were under mortgaged on paper only and other plots were not mortgaged and that it offered the free hold residential vacant land ad-measuring 1942.30 Sq. Mtrs. valued at Rs.12,78,03,000/- and the GIDC land are allotted on long lease for 99 years. The same are easily transferable to the third party registered under the Transfer of Property Act, 1882 and the stamp duty is also paid. Moreover, the GIDC plots are easily transferable and are sold and bought in the market. The bank also grants loan against the mortgaged on such plots. Aggrieved by this entire rejection, the petitioner is before this
Court seeking following reliefs:
“(A) That Your Lordships may be pleased to issue a Writ of Mandamus, or any other appropriate writ, order or direction, directing Respondent Nos. 3 and 2 herein to allow the Petitioners to make use of funds lying by way of Fixed Deposits and bank accounts (listed at Annexure-“A”) with the banks thereby quashing and setting aside, or modifying appropriately, the GST-DRC-22 dated 25.11.2021 and letter dated 16.07.2022 for provisionally attaching and continuing the above Fixed Deposits and Current accounts with the banks;
(B) That Your Lordships may be pleased to issue a Writ of Mandamus, or any other appropriate writ, order or direction, directing Respondent Nos. 3 and 2 herein to accept factory land of the Petitioner firm or Residential Plots of the Petitioner No. 2 as a security in lieu of Fixed Deposits and the money lying as balance in the Petitioner’s three Current accounts with the banks and thereupon lifting provisional attachment of Fds and bank accounts (listed at Annexure-“A”) with the banks;
C) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct Respondent No.3 and 2 herein to allow the Petitioner firm to make use of funds lying by way of Fixed Deposits and the balance in Current accounts (as listed at Annexure-“A”) and to instruct the banks to allow the Petitioner firm to use these Fixed Deposits and bank accounts, on the terms and conditions that may be deemed fit by this Hon’ble Court; or
D) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct Respondent No.3 and 2 herein to convert the amount of Rs. 4,11,25,000/- lying in current account of the Kalupur Commercial Co-op. Bank Ltd. into Fixed Deposits and allow to withdraw Rs.13,00,000/- inadvertently deposited in Bank of Axis Bank Ltd. after provisional attachment, on the terms and conditions that may be deemed fit by this Hon’ble Court;
E) An ex-parte ad-interim relief in terms of Para 25(C) or (D) above may kindly be granted;
F) Any other further relief that may be deemed fit in the facts and circumstances of the case may also please be granted.”
4. Affidavit-in-reply is filed by Mr. Dharmendra Z. Patel, working as Assistant Commissioner of SGST, Rajkot stated that the genesis of controversy lies in the provisional attachment of the Factory and Shed, Land and Machinery, Stocks, Current Accounts, Sundry Debtors, Personal immovable properties of petitioner No.1 through attachment Orders passed by Office of the respondent. This was necessary pursuant to the alleged wrongful availment of Input Tax Credit through purchases made from bogus and fictitious firm and consequential sale of the same by the petitioner firm, which ultimately according to the respondent, has resulted into the evasion of the payment of tax. This evasion is to the tune of Rs.68,91,70,543/- (Rs. Sixty Eight Crores Ninety One Lacs Seventy Thousand Five Hundred Forty Three only).
4.1 The provisional attachment of this properties were subject matter of litigation before this Court in Special CA No.188 of 2022. Where the Court on 27.01.2022, quashed the provisional attachment Orders with regard to the attachment of immovable property of petitioner No.1 observing therein that the other properties of the petitioner firm shall remain under provisional attachment in accordance with law.
4.2 The petitioner firm addressed two communications on 28.03.2021 and 21.04.2022 on the Office of the respondent, where the firm had shown its inclination to have the provisional attachment of the 3 Current Accounts and 24 Fixed Deposits maintained by it in the various banks to be lifted. It approached this Court by way of Special CA No.10659 of 2022 where the Court directed the authorities to decide the applications within a period of four weeks.
4.3 The communication of 24.06.2022 indicates the inclination of the petitioner to have land bearing Plot No. 702+717, 718 and 719 situated at the address given in the communication to be provisionally attached in lieu of Fixed Deposits and the Current Accounts that continued to remain provisionally attached. The petitioner firm vide another communication addressed to the respondent on 24.06.2022 itself, has shown its inclination to have the Fixed Deposits and Current Accounts to be provisionally attached. Both these communications would reflect, according to the respondent, that the petitioner firm was inclined to have the factory land provisionally attached in-lieu of the Fixed Deposits and Current Accounts and on the other hand, it is also willing to have its Fixed Deposits and Current Accounts be continued to be provisionally attached. These are contrary suggestions. The two proposals from modifications of the Order of provisional attachment are given, which are not to be accepted by the respondent with the following reasons:
“i. Attachment of Plot No. 702+717, 718 and 719;
ii. Attachment of land in the ownership of Petitioner No. 1 (wrongly stated to be the ownership of Petitioner No. 2 in prayer clause of the Memo of the present address at Rev. Sr. Petition), having its No. 49/IP/3, Plot No. 7, 8, 9, 10 & 11, “Maruti Park”, Nr. 150 Ft. Ring Road, Opp. HP Petrol Pump, Ronki, Dist.Rajkot– 360003;
iii. The lifting of the Fixed Deposits and Current Accounts maintained maintained by the Petitioner Firm with various banks;
iv. The Central Board of Indirect Taxes and Customs has issued a circular dated 23.02.2021 laying down the guidelines for provisional attachment of property under section 83 of the Goods and Service Tax Act, 2017. Guidelines No.3.4.6 prescribes that;
“In cases where the movable property, bank to including account, belonging taxable person has been attached, such movable property may may be released if taxable person offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. Such immovable property should be of value not less than the tax amount in dispute. It should also be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal dispute. The taxable person must produce the original title deeds and other necessary information relating to the property, for the satisfaction of the concerned officer.”
In the present case, the Petitioner has proposed to offer the land which is already in the ownership of Gujarat Industrial Development Corporation and the same has been leased to the Petitioner Firm. Therefore, the proposal of the Petitioner to have the land bearing Plot No. 702+717, 718 and 719 be provisionally lifted in-lieu of its Fixed Deposits and Current Accounts would be in violation of the Guidelines No. 3.4.6 of the circular issued by the Central Board of Indirect Taxes and Customs.
v. The Petitioner Firm has proposed to have its residential Plot situated at Rev. Sr. No. 49/IP/3, Plot No. 7,8,9,10 & 11, “Maruti Park”, Nr. 150 Ft. Ring Road, Opp. H.P. Petrol Pump, Ronki, Dist- Rajkot-360003 be attached as a security in-lieu of its Fixed Deposits and Current Accounts maintained with the various other Banks. The afore-mentioned proposal cannot be accepted as the residential Plot is of the personal ownership of the Petitioner No. 1 and the same cannot be attached as per the judgment dated 27.01.2022 passed in Special Civil Application No. 188 of 2022, whereby the Hon’ble Court has quashed aside the very action of the Respondent authorities of attaching the very same afore-mentioned personal property belonging to the Petitioner No. 1. Therefore, the fresh proposal to have the said residential property being reattached provisionally would be in violation in the afore-mentioned Judgment and Order. Moreover, guideline no. 3.4.3 prescribes that provisional attachment can be made only of the property belonging to the taxable person against whom the proceedings is mentioned under section 83 of the Act are pending. The Petitioner Firm has been regarded as a ‘taxable person and therefore the personal property of the petitioner No.1 cannot be attached.”
4.4 According to the respondent, the tax liability increased to nearly to Rs.95 Crores, a provisional attachment should continue in order to protect the interest of government revenue.
5. The affidavit-in-rejoinder is also filed by one of the partners Ms. Arpana Arya, where she has chosen to press into service the provisional attachment of Plot No.702+717, 718 and 719 in lieu of the Fix Deposits and Current Accounts. It is also urged that “Maruti Park” Plot Nos.7, 8, 9, 10 & 11, Nr. 150 Ft. Ring Road, Opp. HP Petrol Pump, Ronki, Dist. Rajkot – 360 003 is offered. According to her, the decision of High Court on 27.01.2022 has been misread. The CBIC guideline dated 23.02.2021 is very categorical that if a taxable person offers in lieu of movable property including bank accounts any other immovable property which is sufficient to protect the interest of the revenue, the movable property needs to be released. The instructions dated 23.02.2021 of the CBIC clarifies that “such immovable property should be of value not less than the tax amount in dispute”. The value of the property attached, according to the petitioner, is Rs.45.90 Crores and even if the amount of stock of raw materials which is released by an order dated 27.01.2022 and Rs.11.91 Crores in the form of FDs lying in Current Bank Account are deducted then also by the balance amount of Rs.32.07 Crores, the revenue’s interest would be well protected.
5.1 Further affidavit on the part of the petitioner is also filed, which may not be required to be dilated.
6. The only short question that needs to be addressed by this Court is as to whether in wake of the earlier order of this Court in Special CA No.188 of 2022 on 27.01.2022, the request of the petitioner to replace the properties should be permitted or not? And this is a request on the part of the petitioner to facilitate him to use the funds lying in the Fixed Deposits and Current Accounts attached by the respondent authority on 25.11.2021. Order of provisional attachment passed under Section 83 of the CGST Act by the respondent authorities on 25.11.2021. The CBIC issued the circular dated 23.02.2021 laying down the guidelines for provisional attachment of the property under Section 83 of the CGST Act. Guidelines No.3.4.6 provides that any movable property including bank account belonging to the taxable person when has been attached, the same can be released when the taxable person offers in lieu of it any other immovable property, if the same is sufficient to protect the interest of the revenue and such immovable property should be of the value not less than the tax amount in dispute. The same should be free from any charges, liens, mortgaged or encumbrance, the property’s tax also needs to be fully paid up and the same is not to be involved in any legal dispute. The original title deeds and other necessary information relating to the properties for the satisfaction of the concerned officer shall be produced before it by the taxable person. What can be noticed by this Court is that the amount of tax as shown in form GST-DRC-22 dated 25.11.2021 is Rs.31,02,53,631/- where of course, the penalty of matching amount and the interest of Rs.6.78 Crores making it total Rs.68.83 Crores. Going by this circular of CBIC dated 23.02.2021, the immovable property’s value should be not less than the tax amount in dispute. What is being presently offered by the petitioner is the land ownership of petitioner No.1, having its address at Revenue Survey No.49/IP/3, Plot No.7, 8, 9, 10 & 11 of “Maruti Park”, Nr. 150 Ft. Ring Road, Opp. HP Petrol Pump, Ronki, Dist. Rajkot – 360 003.
7. While considering the action of the respondent, has noticed that it has taken the aid of Section 90 and 137 of the Act. Section 83 of the CGST Act speaks of the provisional attachment to protect the revenue in certain cases. The taxable person as defined under Section 2(107) is a person, who is registered or liable to be registered under Section 22 or Section 24 taking note of Section 90 as to whether the same would have an application, the Court held thus:
“19 Thus, a taxable person is a person who is registered or liable to be registered under Section 22 or Section 24 of the Act. Section 22 of the Act reads thus:
“22. Persons liable for registration – (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day.
(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal.
Explanation.––For the purposes of this section,––
(i) the expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
(iii) the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution.”
20. Section 24 of the Act reads thus:
“24. Compulsory registration in certain cases.-Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––
(i) persons making any inter-State taxable supply;
(ii) casual taxable persons making taxable supply;
(iii) persons who are required to pay tax under reverse charge;
(iv) person who are required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
(viii)Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;
(x) every electronic commerce operator;
(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and (xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.”
21. The term “person” has been defined under Section 2(84) of the Act. It reads thus:
“2. In this Act, unless the context otherwise requires,–
(84) “person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to cooperative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;”
22. The respondent No.3, having realized that it is only the property belonging to a taxable person that can be provisionally attached under Section 83 of the Act and the partner of an LLP not being a taxable person in the case on hand, thought fit to take the aid of Section 90 and Section 137 resply of the Act for the purpose of provisionally attaching a property owned by the partner of the LLP.
23. The moot question is whether Section 90 of the Act has any application to the case on hand.
24. Section 90 of the Act is nothing, but the very same principle of law, as enunciated under Section 25 of the Partnership Act. Section 25 of the Partnership Act reads thus:
“25. Liability of a partner for acts of the firm.—Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.”
25. In the case of Her Highness Maharcmi Mandalsa Devi VS.H. Ramnarain Private Ltd. reported in 65 B.L.R. 31, it has been laid down by the Supreme Court that a partnership firm is to be treated as a corporate body only for the purpose of Order XXX of the Code of Civil Procedure. The legal fiction created by Order XXX cannot be carried too far. The partnership firm has no legal entity. The persons, who are individually called partners, are collectively called a firm, and the name under which their business is carried on is called the firm name. Therefore, a suit against the firm is really a suit against all the partners of the firm, and therefore, a decree passed in such a suit is in effect a decree against all the partners though it may in form be against the firm. This decision of the Supreme Court merely lays down as a principle of law that a partnership is not a legal entity distinct from its partners. A firm and its partners are, therefore, interchangeable firm. If, therefore, a partnership firm incurs any liability, it is the liability of all the partners.
26. Section 25 of the Partnership Act, 1932 referred to above provides that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. It is, therefore, clear that the liability of a partnership is the joint and several liability of all its partners.
27. Thus, what Section 90 of the Act, 2017 conveys is the very same principle as enunciated under Section 25 of the Partnership Act. In future, as and when the liability of the LLP as a taxable person is determined and fixed, such liability would be joint and several liability of all its partners. In the case on hand, the respondent No.3 committed a serious error in invoking Section 90 of the Act for the purpose of provisionally attaching a property owned by a person of the LLP under Section 83 of the Act. There are two reasons why we say so. First, a partner of an LLP is not a taxable person. It is the LLP i.e. the partnership firm who is a “taxable person”. The liability of the firm is yet to be determined. There has been no assessment so far as the liability of the firm is concerned. The day such liability is determined and fixed, it is open for the department to proceed not only against the firm as a taxable person, but also against individual partner of the firm.
28. Section 137 of the Act has absolutely no application. Section 137 is a provision which fixes the vicarious liability of the partners in the event any offence is committed by a firm.
29. Sub-section (84) of Section 2 of the Act, 2017 defines the term “person” to include an individual, a Hindu Undivided Family, a company, a firm, a limited liability partnership, etc. Therefore, the Act recognizes a firm as a dealer and as a person. The legislature having treated an LLP as a taxable entity, distinct from the individual partners constituting it, it was not open for the respondent No.3 to provisionally attach the immovable property owned by a partner of the firm.
30. In the aforesaid context, a reference is made of the decision of the Supreme Court in the case of Kapurchand Shrimal vs. Tax Recovery Officer, Hyderabad and others [AIR 1969 SC 682] wherein the Supreme Court has held as under:
“5. The scheme of the Income-tax Act, 1961, is to treat the assessee failing to pay the tax due within the period prescribed a defaulter. The Income-tax Officer may, where the assessee is found to be in default, issue a certificate for recovery and forward it to the Tax Recovery Officer specifying the amount of arrears due from the assessee. The amount due may be recovered by resort to any one or more of the four modes prescribed by Sec. 222 of the Act. If the defaulter fails to comply with a notice issued by the Tax Recovery Officer requiring the defaulter to pay the amount within fifteen days from the date of the service of the notice, proceedings for recovery may be taken against the assessee for recovery of the tax. But under the scheme of the Act and the Rules, the assessee alone may be treated in default. The Act and the Rules contemplate that the notice for payment of the tax arrears may be issued against the assessee, and proceedings for recovery of the tax may be taken against the assessee alone. Under the Income-tax Act, 1961, a Hindu Undivided Family is a distinct taxable entity, apart from the individual members who constitute that family. Section 4 of the Income-tax Act charges to tax for any assessment year the total income of the previous year of every person and ‘person’ is defined in Section 2 (31) as including- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. The Legislature having treated a Hindu undivided family as a taxable entity distinct from the individual members constituting it, and proceedings for assessment and recovery tax having been taken against the Hindu undivided family, it was not open to the Tax Recovery Officer to initiate proceeding against the manager of the Hindu undivided family for his arrest and detention. It is true that if properties of the family, movable and immovable, are to be attached proceedings may be started against the Hindu undivided family and the manager represents the family in proceedings before the Tax Recovery Officer. But by the clearest implication of the statute the assessee alone may be deemed to be in default for non-payment of tax, and liability to arrest and detention on failure to pay the tax due is also incurred by the assessee alone. The manager by virtue of his status is competent to represent the Hindu undivided family, but on that account he cannot for the purpose of Section 222 of the Act of 1961 be deemed to be the assessee when the assessment is made against the Hindu undivided family and certificate for recovery is issued against the family.”
31. Having regard to the principle enunciated in the above decision as well as in the light of the above discussion, this Court is of the view that the respondent No.3 was wholly unjustified in provisionally attaching a personal property owned by a partner of the firm under Section 83 of the Act, 2017.”
8. This Court, thus, has been very clear that the respondent No.3 was unjustified in provisionally attaching the personal property owned by the partner of the firm under Section 83 of the CGST Act, as she is not a taxable person for being the partner of the firm.
9. We noticed from the guideline issued by the Central Board of Indirect Taxes and Customs (CBIC) dated 23.02.2021 that the movable property, when is attached, the taxable person can offer in lieu of such movable property, any other immovable property which is sufficient to protect the interest of the re It is one thing for the Court to hold that there is a fetter on the powers of the officer concerned in attaching the properties which is not of the taxable person. When it comes to offering the immovable property, it is one of the partners, who though is not held to be a taxable person by the Court, it is offering that property which is unencumbered with a clear title and which is sufficient to protect the interest of the revenue. It is also incidental to be noted that both the spouses are the partners of the firm. This immovable property is also of a value not less than the tax amount in dispute. There is nothing which is come on the record on the part of the revenue to show that this is not free from any subsisting charge, liens, mortgages or encumbrances. The property tax has been fully paid and it is not involved in any legal dispute.
10. The petitioner is before this Court seeking certain prayers has been also forming the part of the order passed by this Court in detail on 08.12.2022 whereby the petitioner being a taxable person was directed to produce the original title deeds relating to the property. The undertaking was also furnished before this Court in relation to the property with an assurance that the same is unencumbered. The valuation report which has been separately given of the government approved valuer is pointing out at the present market value as Rs.10,48,84,200/- of the property. It is also being confirmed that the same is unencumbered. The fresh valuation report produced on record of Mr. Nitesh N. Dholaria is Rs.10,48,84,200/- and Mr. Suresh Mistry is Rs.13,01,92,000/- of the very property.
10.1 The property offered by the petitioner is unencumbered. The property valuation of which, as given by the State, is Rs. 10,48,84,200/- being the market value, whereas, the value of the very property offered in substitution being the plots No.7,8,9,10 and 11 of Revenue Survey No.49/1/ P3, Maruti Park, 150 Ft.Ring Rad, Village-Ronki, Taluka-Dist.Rajkot, as per the Government Approved Valuer Mr. Suresh Mistry is Rs.13,01,92,000/- We do not see any reason to disregard the valuation given by the Government Approved Valuer on a higher side in absence of any other material or the reason for rejecting the same. Therefore, we direct respondents No.2 and 3 to substitute the same with the amount of fixed deposit provisionally attached, except the amount of fixed deposit of Rs.2,24,99,844/- lying in the current account. The fixed deposit of Rs.2,24,99,844/- lying in the current account shall continue to be in the provisional attachment. The remaining amount, which has been provisionally attached, shall be immediately released on receiving the copy of this order along with an undertaking on the part of the petitioner and the partner-cum-owner of the property. It shall need to be ensured by the petitioner and the owner of the property that the same shall, in no manner, be marketed or offered to any other authorities in any of the proceedings. The property in question shall not be subjected to mortgage or future litigation.
11. With the above directions, petition is being allowed partially. The provisional attachment made of the amount of Rs.2,24,99,844/- i.e. fixed deposit in the current accounts shall continue to be in the fixed deposit, remaining amount shall be released on receiving the copy of this order and the undertaking on the part of the petitioner. Fresh order of attachment shall be permitted to be challenged. None of the observations made herein shall come in the way of either side.